P&G Gillette Merger

P&G-Gillette Introduction On January 28th 2005 P&G agreed to buy Gillette for $57bn (? 30). Gillette was the number 1 in razor chafeories and proctor gamble was number 1 in consumer products, a marriage of the surmount in their respective industries. The merger of the two companies created the worlds largest consumer products conglomerate. Gillette was a draw in its category of razors and batteries, merging with P&G provided it access to P&Gs technology and securities industrying skills.P&G added Gillette razors , Right Guard deodorant and Duracell batteries to its more(prenominal) than 300 consumer distinguishs, including bead Soap, foreman and Shoulders shampoo, Pringles, Crest toothpaste and Bounty paper towels. society Background P&G P&G a fortune 500 bon ton headquartered at down Cincinnati, Ohio. P&G is manufacturer of wide range of consumer products ranging from Ivory Soap, Head and Shoulders shampoo, Pringles, Crest toothpaste and Bounty paper towels. P&G describ e revenue of $82. 6 zillion in 201.P&G was started in 1837 when William monitor, a candlemaker, and James Gamble, a soapmaker, met in Cincinnati to become business partners and Proctor and Gamble was born. In 18581859, gross gross revenue reached $1million. By this point, approximately 80 employees worked for Procter & Gamble. In 1880, P&G discovered and foods calc-tufaed an inexpensive soap that floats on water c each(prenominal)ed Ivory soap. William Arnett Procter, William Procters grandson, started a profit sharing program with the beau mondes workforce in 1887. This program eliminated the chances of workers going to strike. attach to overt many facilities to cover up the exponentially increasing demand. In 1920s and 1930s when radio because popular, PG sponsored a number of shows and before long the radio shows were known as soap operas. PG expand into unsanded-fashioned countries in both areas manufacturing and product sales and with the acquisition of doubting Thomas Hedley co. in 1930, PG became an international corporation. Large number of products and brand names were introduced over time, and PG branched out into impertinent areas. Tide, laundry detergent, and Prell shampoo was introduced by the company in 1946 and 1947 respectively. primary toothpaste Crest containing fluoride was ex budge by PG in 1955. In 1957 company branched out again with the purchase of Charmin story mill around and began manufacturing toilet paper and other paper products. Once again cerebrate on laundry, Procter Gamble began making Downy fabric softener in 1960 and resile fabric softener sheets in 1972. Prior to 1960 Johnson and Johnson were manufacturing disposable diaper called Chrux n invariablytheless PG came out with one of the most revolutionary products on the market called Pampers, first test-marketed in 1961.Babies alship canal wore cloth diapers, which were leaky and labour intensive to wash. Pampers provided a convenient alternative, albeit at the environ handstal damage of more gaga requiring landfilling. To diversify its product line and to increase profits PG acquired a number of companies. Some of the acquisitions included Folgers Coffee, Norwich Eaton Pharmaceuticals (the makers of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shultons Old Spice, Max Factor, and the Iams Company.In 1994, P&G was in earn headlines, the management was placed in an unusual position of testifying in front of court in benignant with interest rate derivatives which they were not much capable to understand and incurred wide losses from that leveraged position and later on they sued the Bankers trust for the fraud. In 1996, P&G was again in headlines as Food and Drug system approved a new Product developed by company called Olestra.As the brand was called Olean, it was a lower-calorie substitute for fat use in cooking potato chips and other snacks but during its development stage it was associated with anal retentive leakage and gast rointestinal difficulties in humans. On 28th January 2005 Gillette was acquired by P&G, forming the largest consumer goods company and placing Unilever into second place. This acquisition helped P&G to add new products into its product line that included brands such as Gillette razors, Duracell, Braun, and Oral-B.The European merger and the Federal Trade Commission approved the acquisition, with conditions to a spinoff of certain overlapping brands. P&G agreed to betray its Spin Brush battery-operated voltaic toothbrush business to Church & Dwight. P&G also divested Rembrandt a Gillettes oral-care toothpaste line. Official merger took place on October 1, 2005. The deodorant brands Right Guard, emollient Dri, and Dry Idea and Liquid Paper, and Gillettes stationery division, Paper Mate was sold to Dial Corporation and Newell Rubbermaid respectively.In 2008, P&G branched into the enrol business with its sponsorship of Tag Records, as an haltorsement for TAG Body Spray. Gillette Gillette, before founded as American Safety Razor Company, is a world leader in men grooming products as well as of women. It was founded by King Gillette who in 1895 came up with the idea of disposable razor afterward being frustrated by asleep(p) old razors that required nonrecreational honing. He envisioned an inexpensive razor brand cabal where marque can be clamped on the razor and once getting dulled can be replaced. subsequently six old age of innovation and engineering finally in 1901 after joining hands with a MIT machinist, William Nickerson, American Safety Razor Corp was born. In 1903 company was renamed as Gillette. Company stipendiary the first cash dividend in 1906. Before First valet de chambre War Gillette expanded abroad opening in London, first sales office was opened, manufacturing plants in Paris, Montreal, Berlin, and Leicester, England, and offices in France and Hamburg, Germany. By 1923, Income from foreign operation accounted for 30% of the total i ncome.In 1910, Owner and President King Gillette decide to sell a major portion of his stake to investor John Joyce. Joyce was made the vice-president of the company. After his death in 1916 his friend, Edward Aldred, bought out the shares go away to Joyce and took charge of the company. Gilletts sheer on safety razor expired in 1921 and company was put up for new change. Gillette introduced the new improved razor at the old price, and used the old style razor, renamed the Silver Brownie razor at $1, to draw in the low-priced end of the market.Gillette transformed into the razor blade model by full-grown away razor handles as premiums with other products, developing customers for the more profitable blades. Abroad expansion also continued. In 1922 Gillette became royal purveyor to the prince of Wales and in 1924 to King Gustav V of Sweden. Gillette came into top headlines when its Paris office gave Charles Lindbergh a Gillette coin Traveler after he completed the first transat lantic flight. Company named Auto Strop Safety Razor, owned by Henry J.Gaisman, filed oblige against Gillette for patent infringement after Gillette produced a new blade apply a continuous-strip process similar to one originally demonstrated to Gillette by Gaisman. Merging with Auto Strop solved the problem for Gillette but it gave cause to another problem. Gaisman checked the companys financial records and found out that Gillette had over-reported its earnings by $3 million for the past five. Stock price of Gillette fell from a high of $125 early in 1929 to $18 by end of decade. This led to the reorganization of Gillette.King Gillette resigned as nominal president and Gaisman became the new chairman of Gillette and Gerard B. Lambert, son of the founder of the Lambert Pharmacal Company and a former(prenominal) manager there, came out of retirement to become president of Gillette. Gillette blatantly went to market and admitted the poor quality of its old blade and came up with a blade called blue blade made by continuous-strip process. Gillette entered into sports advertising and this lead to subtile increase in the sales. In 1942 sports events held by Gillette were called Gillette Cavalcade of Sports.In 1962 Gillette faced tuff competition from the English Wilkinson Sword Company as it started exporting the unblemished steel blades to United States. Gillette also faced challenges from local player in stainless steel category and was left fuck in the race. Gillette was left behind and latter it supported into and developed a new blade but at that time it had lost its market share by 10%. By 1971 Gillette had four domestic divisions the Safety Razor Division the Toiletries Division, which feature Right Guard deodorant and antiperspirant the Personal Care Division and the Paper Mate division.In mid 1970s Gillette divested its business by exchange off unprofitable business such as Buxton in 1977, satisfying Wagon in 1978, and Hyponex and the Autopoint m echanical pencil business in 1979 and pumping property into the core business. In 1986, Gillette was being pursued by Ronald Perelman, who had previously interpreted over Revlon. He was about to make a tender commotion for Gillette, Gillette responded by paying Revlon $558million in return for Revlon not making a tender offer. This exposed the Gillette vulnerability and it resulted in Gillette going with standstill savvy with 10 different companies.Gillette had responded to various takeover threats by cutting cost and thinning the workforce. Gillette also divested its weak operations and because of it farm animal showed a jump by 24%. By 2004 Gillette had annual sales of $10. 5 trillion and net income of $1. 7 billion. The Acquisition On January 28th 2005 PG announced the acquisition of Gillette. As per the deal, 0. 975 shares of PG parking lot stock were exchanged for each share of Gillette. It accounted for 18% premium to Gillette shareholders based on the closing share price s on January 27, 2005.However, the approval by the shareholders of both Gillette and PG was required. The merger was expected to get regulatory clearance by 2005. PG planned to buy back $18-22 billion of its common stock in around 18 months immediately after the merger. The social system of deal came out to be 60% stock and 40% cash, although on paper it was a pure stock-swap. The extra 18% premium paid by PG for Gillettes stock looked like that it made 18% more difficult for the deal to pay dividends to stock holders. The problem was in buying back shares as P&G would seduce to suck funds to finance this transaction.In light of this move, both the companies came under the electronic scanner of credit agency for a possible downgrade. S&P considered all the rating for P&G under negative umbrella vigil based on the likelihood that the deal would cause P&G to increase its leverage. As of September 30, 2004, P&G had debts of $21. 4 billion and Gillette of $3. 1 billion. Synergies G illette maintains 64 manufacturing facilities in 27 countries, and its products are sold in more than 200 countries and territories, with more than 60 percent of sales occurring out of doors the United States.For P&G the acquisition of Gillette was an opportunity for P&G to add a masculine dimension to overwhelmingly female-biased portfolio. This seems to be a merger of exactly strategically fit companies who complement each other. It was combination of two best-in-class companies creating a stronger brand portfolio, opportunities for even more innovation, faster sales growth, and cost savings. The importance of economies of shell and focus as described by analyst, P&G had attempted to gain both with this acquisition.There was change in marketing sense as Gillette market was mostly towards men so P&G women dominated product category have showed steep learning curve in understanding the men marketing. It was rise to its product category and therefore enhancing the top line. Both t he companies have front line in different part of globe made the deal a geographical fit. Gillette has strong presence in countries such as brazil and in India, where P&G has been lagging behind Unilever. P&G has excellent penetration and distribution in China, the Philippines and fast-growing Eastern European markets such as Russia and Poland.Diversification of Product Portfolio As there was minute overlapping in Gillette and P&G business this helped P&G to broaden its product base and offer more products to men in its women dominated product category. Story Now After five years of the deal, things havent gone the way as expected. The boost to the top line that was expected by P&G with acquisition of Gillette has been in doldrums. P&G has lost the Gillette top management talent as most of senior managers (with the notable exception of current P&G Vice Chairman Ed Shirley) have left.P&Gs stock has lagged behind spot competitors, including Colgate-Palmolive Co. and Unilever, beat en P&G 4 to 1 and 3 to 1, respectively, in the stock market. The recession has played against P&G bloodline in sales in Gillette products have become a footing of worry for P&G. P&G executives and Gillette officials show an optimistic muckle on the deal they feel still a lot more is still to come. Gillette has helped P&G to transform in different ways that arent always obvious.PG has made aggressive moves in key markets such as Brazil and India a much stronger operation end-to-end Europe and an even stronger showing on U. S. retail shelves a ever growing investment which will increase the companies efficiency and help it to write the best with innovated products. The deal has indeed given both the companies significant advantages. Economies of scale have been brought in along with some cost cutting giving PG increase in revenue and income. But only(prenominal) time will tell if this union of seemingly very matched partners is truly a match made in heaven.Exhibits PG balance s heet Balance Sheet 29-Jun-11 29-Jun-10 29-Jun-09 29-Jun-06 Assets Current Assets bills And Cash Equivalents 2,768,000 2,879,000 4,781,000 6,693,000 Short Term Investments Net Receivables 7,415,000 6,325,000 7,045,000 Inventory 7,379,000 6,384,000 6,880,000 other Current Assets 4,408,000 3,194,000 3,199,000 broad(a) Current Assets 21,970,000 18,782,000 21,905,000 persistent Term Investments Property Plant and Equipment 21,293,000 19,244,000 19,462,000 Goodwill 57,562,000 54,012,000 56,512,000 intangible asset Assets 32,620,000 31,636,000 32,606,000 Accumulated Amortization Other Assets 4,909,000 4,498,000 4,348,000 Deferred Long Term Asset Charges agree Assets 138,354,000 128,172,000 134,833,000 Liabilities Current Liabilities Accounts Payable 17,312,000 15,810,000 14,581,000 Short/Current Long Term Debt 9,981,000 8,472,000 16,320,000 Other Current Liabilities 7,768,000 tally Current Liabilities 27,293 ,000 24,282,000 30,901,000 Long Term Debt 22,033,000 21,360,000 20,652,000 Other Liabilities 9,957,000 10,189,000 9,146,000 Deferred Long Term Liability Charges 11,070,000 10,902,000 10,752,000 Minority Interest 361,000 324,000 283,000 Negative Goodwill Total Liabilities 70,714,000 67,057,000 71,734,000 Stockholders integrity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock 1,234,000 1,277,000 1,324,000 parking lot Stock 4,008,000 4,008,000 4,007,000 Retained clams 70,682,000 64,614,000 57,309,000 Treasury Stock -6. E+07 -6. 1E+07 -5. 6E+07 bully Surplus 62,405,000 61,697,000 61,118,000 Other Stockholder Equity -3411000 -9172000 -4698000 Total Stockholder Equity 68,001,000 61,439,000 63,382,000 Net Tangible Assets -2. 2E+07 -2. 4E+07 -2. 6E+07 P&G Income statement FINANCIAL sum-up (UNAUDITED) Amounts 2006 2005 2004 2003 2002Net Sales $68,222 $56,741 $51,407 $43,377 $40,238 Operating Income 13,249 1 0,469 9,382 7,312 6,073 Net meshwork 8,684 6,923 6,156 4,788 3,910 Net Earnings Margin 12. 70% 12. 20% 12. 00% 11. 00% 9. 70% Basic Net Earnings Per Share Common Share $ 2. 79 2. 7 2. 34 1. 8 1. 46 Diluted Net Earnings Per Common Share 2. 64 2. 53 2. 2 1. 7 1. 39 Dividends Per Common Share 1. 15 1. 03 0. 93 0. 82 0. 76